After War, Rebirth

Flames of War Extinguished

On August 14, 1945, the Japanese government accepted to the Potsdam Declaration, which called for unconditional surrender, at last bringing the four-year war in the Pacific to an end. This finally brought long-awaited peace after the loss of millions of lives; in Japan, most had lost their homes and the population faced severe food shortages.Following the war, the Allies set up an occupation administration in Tokyo to carry out deep reforms. As part of the effort to transform Japan from militarism to democracy, a series of fundamental policies that underpin modern Japanese society were put into place, including the new constitution and the principle of equality between the sexes.The occupation’s reforms extended to the economic sphere as well the political. One was the breakup of the industrial conglomerates—the zaibatsu. The occupation administration considered Japan’s zaibatsu a force the old military government had used in its war effort and made their breakup one of the key steps in transitioning the economy away from strict government-control and influence in order to help prevent a revival of militarism. Realizing that it would inevitably be subject to this policy, Sumitomo moved to face the coming changes squarely. It took active steps in the direction of the occupation administration’s policy by notifying companies under its umbrella that they could no longer use the Sumitomo trade name and trademark while at the same time exploring the dissolution of its central holding company or offering its shares to the public, and renewing the top management.In November 1945, the occupation administration ordered the breakup of 4 big(Mitsui, Mitsubishi, Sumitomo, Yasuda) zaibatsu. Then in December, it specified 336 going concerns as 18 zaibatsu members. This included a large number of Sumitomo companies involved in a range of businesses. At a time when demand for capital was high, both to pay for raw-material costs that were being driven up rapidly by staggering inflation, and to pay for post-war reconstruction of damaged equipment and facilities, Sumitomo was restricted the scope of its business activities.

The Road to Reconstruction

But Sumitomo was not merely buffeted by the tide—it took initiative. At Sumitomo Electric Industries, for example, just three days after the acceptance of the Potsdam Declaration, the company started manufacturing electrical wire again at a plant that had escaped damage in the war, and the plant also put its precious resources to work manufacturing household goods. Although the Sumitomo group’s many plants had supplied the military during the war, they now began making goods to fulfill people’s everyday needs by manufacturing items like frying pans and washbasins, as well as farming tools such as spades and hoes which were in high demand as farmers worked to increase food production.With citizens and companies alike working vigorously to rebuild after the war, a major turning point came in 1950—the outbreak of the Korean War. This war on Japan’s doorstep, which was brought about by disagreements stemming from the Allies’ division of Korea along the 38th parallel following WWII, was a boon to the Japanese economy.The following year, 48 allied nations, including the United States, signed the Treaty of Peace with Japan, marking the end of the occupation. The treaty recognized Japan’s rights of sovereignty, equality, and individual or collective self-defense, and at last fully released the country from the shackles of the war. That was when Sumitomo was able to truly get off to a new start. The use of the Sumitomo name was again permitted and 12 companies in fields spanning Japan’s leading industrial sectors—including mining, metals, chemicals, steel, and finance—were born anew. This was not a resurrection of the pre-war zaibatsu: These companies formed a new Sumitomo Group, with each on an equal footing and making decisions independently of the others. Moreover, there was no central coordinating authority above the group companies.The Sumitomo Group now comprises some 43 core companies. As discussed in Part I of this series, some 400 years ago, founder Sumitomo Masatomo (1585–1652), in his Monju-in Shiigaki, wrote that business should be built on trust and reliability, and one should not pursue easy profits. Today, Sumitomo Group companies continue to do business with these ideals as their basic philosophy, a moral code reflected in Sumitomo’s distinctive corporate principles and corporate culture.